Detroit 3 Increase Market Share

The Detroit 3 automakers were the first to introduce generous customer incentives to a maimed marketplace, and consequently their sales rates, while disturbingly low, are better than many competitors’.

That’s according to J.D. Power’s weekly report on the COVID-19 virus’ effect on the auto industry.

Industrywide, vehicle sales have been awful, largely because of stay-at-home orders in all but eight U.S. states.

But combined retail market share for General Motors, Ford and Fiat Chrysler remained above 50% for a second consecutive week for the first time since 2006, rising 11 percentage points since the week ending March 15.

The Detroit 3 were the first to launch loan offers of zero-percent interest, 84-month terms and 120-day deferred payment on specific vehicles. On April 1, Hyundai, Nissan and Genesis introduced similar programs.

“The Detroit 3’s (customer) loyalty is virtually a fortress,” Tyson Jominy, J.D. Power vice president for data and analytics, says, referring particularly to the domestic automakers’ pickup truck buyers. Pickups have outperformed other segments in the weakened market.

For a second straight week, powered by relatively resilient pickup truck sales, net transaction prices set another record, reaching $36,300 for week ending April 5, he says.

Incentives also set a record, reaching an average of $5,100 per unit last week. Incentives averaging $7,300 per unit (highest on record) on light-duty pickup trucks were the primary driver of overall industry incentive spending growth, according to J.D. Power.

March 2020 retail sales ended at 725,000, a decline of 390,000 units (-35%) from J.D. Power’s pre-virus forecast, and down 500,000 units (-41%) from March 2019.

About 152,000 retail sales have occurred in April, a decline of 59% from the pre-virus forecast.

Another shift in the market is a decline in consumers’ trade-in equity. For the week ending April 5, the average equity a consumer had in their trade-in was $2,079. That is a 44% drop.

The average age of vehicles traded in dropped since mid-March from 6.5 to 5 years.

Many of the consumers who traded in their vehicles for new ones were attracted by the generous incentives.

“The decline in equity likely reflects money still owed on the trade-ins,” King says, noting that with consumers trading in vehicles earlier, the depreciation rate can outpace the loan amortization.

J.D. Power reports used-vehicle sales at franchised dealers fell faster (-67%) than new sales (-59%) in the past week. Historically, the used-vehicle market has outperformed the new-vehicle market during economic downturns as consumers looked to reduce expenses.

Wholesale prices on used vehicles are down 14%, King says. “This is another challenge to dealers” who usually make more money on used vehicles than on new ones.